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Research
March 2013
Hong Kong Monthly REVIEW AND COMMENTARY ON HONG KONG'S PROPERTY MARKET
1
Office New measures to
suppress office sales
Residential New measures to
stabilise home prices
Retail New measures to
dampen shop speculation
2
Table 1
Economic indicators and forecasts
Economic indicator Period Latest
reading 2011 2012
2013
forecast
GDP growth Q4 2012 +2.5% +4.9% +1.4% +3.0%
Inflation rate Jan 2013 +3.0% +5.3% +4.1% +4.4%
Unemployment Nov 2012-
Jan 2013 3.4%# 3.4% 3.1% 3.2%
Prime lending rate Current 5.00–5.25% 5.0%* 5.0%* 5.0%*
Source: EIU CountryData / Census & Statistics Department / Knight Frank
# Provisional * HSBC prime lending rate
The following table and figures present a selection of key trends in Hong Kong’s economy and property markets.
March 2013
Hong Kong Monthly
Market in brief
2
Source: Rating and Valuation Department / Knight Frank
Figure 3
Retail property prices and rents
Jan 2007 = 100
Source: Knight Frank
Figure 2
Luxury residential prices and rents
Jan 2007 = 100
Source: Knight Frank
Figure 1
Grade-A office prices and rents
Jan 2007 = 100
Price index Rental index Price index Rental index Price index Rental index
50
70
90
110
130
150
170
190
210
230
250
2007 2008 2009 2010 2011 2012 2013
50
70
90
110
130
150
170
190
2007 2008 2009 2010 2011 2012 2013
50
100
150
200
250
300
350
2007 2008 2009 2010 2011 2012 2013
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”
“
”
“
Demand in the
office sales
market will be
suppressed by
increased stamp
duty costs.
To take control of
land supply from
developers, the
government
announced plans
to scrap the
application list
system. Instead,
from April, it will
release a schedule
for land sales
every quarter.
Monthly review Late February, the Hong Kong government announced further
measures to cool the property market, but this time applicable to
all types of property. In doing so, speculative activity may be
curtailed, but prices are not expected to fall, as demand from
end-users and long-term investors remains strong. With
increased transaction costs, potential buyers will have golden
opportunities to purchase quality property, with more room for
price negotiation.
Prime office
While Hong Kong’s Grade-A office
leasing market remained quiet over
the Chinese New Year holiday, vacant
offices in Central continued to be
absorbed. A Chinese firm leased a
high floor covering 25,079 sq ft of
space in Citibank Plaza in Central. The
leasing appetite of Mainland Chinese
firms for local premium offices grows,
as they see Hong Kong as a platform
for internationalising their businesses.
Meanwhile, in-house expansion was
also witnessed in non-core business
districts. An Internet search engine
company took up an additional
12,000-sq-ft, mid-high floor in Times
Square Tower 2 in Causeway Bay and
an investment bank leased an extra
floor measuring 21,300 sq ft in One
Island East in Quarry Bay.
The government rolled out another
round of tightening measures, which
targeted non-residential property for
the first time in recent years. Demand
in the office sales market will be
suppressed by the increased stamp
duty costs and we believe local
investors will adopt a wait-and-see
attitude until the market has
acclimatised to the new measures, as
they did when the Buyer Stamp Duty
(BSD) and extended Special Stamp
Duty (SSD) were introduced in
October 2012. Vendors with less
‘holding power’ may be more flexible
on prices, but as the effect of the SSD
fades, demand will rebound, as long
as inflation and interest rates remain
low.
The 2013–14 Budget reiterated the
government’s plans to increase land
supply. Nine commercial sites will be
included in the land sales plan, but
they will take some time to
materialise and the total supply will
not relieve the current office shortage
in the city. Relocation of the Wan Chai
government offices involves complex
procedures and inter-departmental
coordination and the sites will not be
available for development until
2018–2019 at the earliest. We expect
office supply will remain limited until
2017, when major government
projects such as CBD2 in Kowloon
East start to come together.
Residential
The residential market experienced a
roller-coaster ride in February. The
traditionally quiet season did not see
a drop in buying sentiment—in fact,
developers sped up their flat sales,
with encouraging results recorded.
Residential sales increased 16.2%,
month on month, to 6,307, while
mass and luxury residential prices
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March 2013
Hong Kong Monthly
“
”
The value of local
retail sales is set to
see close to double-
digit growth in
2013.
gained a further 3.4% and 0.6%,
respectively. Sun Hung Kai Properties
(0016.HK) sold more than 500 units in
RESIDENCE 88 in Yuen Long and The
Wings 2 in Tseung Kwan O, while 360
hotel rooms in Kwai Chung reportedly
sold within two days.
Concerned about potential
overheating in the property market,
the government imposed further
tightening measures on 23 February,
doubling the stamp duty rates for
property purchases. The new rates
apply to both individual and
corporate buyers, but do not apply to
local first-home purchasers.
Meanwhile, the Hong Kong Monetary
Authority tightened mortgage
lending for the sixth time in two years,
requiring banks to increase the
interest rates in mortgage stress tests
by 100 basis points. We believe the
new measures will dampen property
sales in the short term and luxury
residential investors in particular will
hesitate due to increased transaction
costs when making property
investments.
With no developers having bid for the
MTR Corporation’s (0066.HK) Tin Shui
Wai residential site, the plausibility of
the government’s plan to supply
20,000 homes per year was
questioned. To take control of land
supply from developers, the
government announced plans to
scrap the application list system.
Instead, from April, it will release a
schedule for land sales every quarter.
We believe this will help stabilise the
market, as the public will have a
clearer picture on the number of units
available each year.
More tightening measures might be
introduced, should property prices
continue to increase. We therefore
maintain our previous forecast that
residential property prices will remain
stable, with mild upward or
downward movement of less than 5%
in 2013.
Retail
Before the government announced
new measures to cool the
non-domestic property market,
investors remained active in the retail
property sales market. The OLIV, a
Ginza-type retail building at 15–21
Sharp Street East in Causeway Bay,
began presale activity and reportedly
sold a number of floors in the first day
at an average price of over HK$39,300
per sq ft.
On 22 February, the government
announced measures to curb
speculative activity in the property
market, which affected both
individual and corporate buyers. The
stamp duty rates when purchasing
retail property was doubled to up to
8.5% and will now be charged
immediately after the signing of Sales
and Purchase Agreements, rather
than upon execution of conveyance.
The measures are expected to
suppress retail property sales in the
short-term, particularly those
involving speculators and confirmors.
However, with increased transaction
costs, potential buyers will have
golden opportunity to acquire quality
retail property, with more room for
price negotiation. After the
announcement of the new stamp
duty rates, a 700-sq-ft unit on the
ground floor of Graceful Court in Sai
Wan was reportedly sold for HK$18
million, a reduction of over 10% from
the original asking price.
In January, the local retail sales value
surged 10.5%, year on year, to reach
HK$47.4 billion. The monthly sales
value of ‘jewellery, watches and clocks
and valuable gifts’ grew over 12%,
year on year.
On the leasing front, robust activity
continued in prime areas. South
Korean cosmetics brand ETUDE
HOUSE will reportedly open its
second Hong Kong store on the
ground floor of 50 Yun Ping Road in
Causeway Bay at a monthly rent of
HK$600,000, after opening its first
shop in Mong Kok last year.
Meanwhile, units E–G totaling 2,500
sq ft on the ground floor of 54–66
Canton Road in Tsim Sha Tsui were
reportedly preleased for HK$8 million
per month, roughly three times more
than its current lease.
Looking forward, the gross retail sales
value is set to see close to
double-digit growth in 2013, with the
continuing influx of tourist arrivals
and gradual economic growth.
However, upset by increased staff
costs and rentals, retailers’ expansion
plans are expected to turn cautious.
Despite this, with expansion demand
from retailers and limited supply of
retail space in prime districts, rents
are set to rise another 5-10% this
year.
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Vacant offices in Central
continue to be absorbed.
Investors will adopt a
wait-and-see attitude in the
short to medium-term, with
the new round of policy
tightening measures having
been announced.
PRIME OFFICE
Table 2
Selected office sales transactions
District Building Tower / floor
/ unit
Gross area
(sq ft)
Price
(HK$M)
Price
(HK$ psf)
Admiralty Lippo Centre Tower 1 /
38th
floor 17,700 $505 $28,500
Central China Insurance
Group Building 4
th floor 14,500 $185.66 $12,800
Wan Chai Sunshine Plaza 25th
floor 5,100 $53.8 $10,500
Central
The Chinese
Manufacturers
Association of
Hong Kong
Building
17th
floor 3,000 $52.57 $17,500
Central Bank of America
Tower
10th
floor / unit 4
1,800 $51.4 $27,980
Source: Land Registry / Knight Frank
Note: All transactions are subject to confirmation.
Table 3
Selected office leasing transactions
District Building Tower / floor
/ unit
Gross area
(sq ft) Tenant
Central Citibank Plaza 30th
floor 25,079 A Chinese firm
Causeway Bay Times Square Tower 2 /
mid-high floor 12,000
An internet
search engine
company
Quarry Bay One Island East Mid floor 21,300 JP Morgan
Source: Knight Frank
Note: All transactions are subject to confirmation.
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March 2013
Hong Kong Monthly
Grade-A office rents
continued to rise in major
business districts last
month.
Grade-A office prices
remained firm over the past
month.
Table 4 Month-on-month movement of Grade-A office rents (Feb 2013)
Central /
Admiralty Wan Chai /
Causeway Bay Quarry Bay Tsim Sha Tsui Kowloon East
Table 5
Prime office market indicators (Feb 2013)
Net
effective
rent
Change Price Change
District HK$psf/
mth
From
Jan 13
From
Nov
12
From
Feb 12 HK$ psf
From
Jan 13
From
Nov 12
From
Feb 12
Premium
Central 141.9 1.2% 3.1% -7.9% n/a n/a n/a n/a
Traditional
Central 106.5 1.6% 1.9% -6.8% 27,470 0.0% 0.8% 14.3%
Admiralty 82.9 0.0% 2.0% -0.8% 22,871 1.2% 5.2% 23.4%
Sheung
Wan 61.2 0.0% 3.4% -1.0% 20,962 0.0% 3.5% 29.6%
Wan Chai 62.6 0.0% 0.4% -4.3% 18,514 0.7% 5.5% 36.0%
Causeway
Bay 64.3 0.0% 0.4% -2.1% 17,886 0.0% 2.7% 31.8%
North Point 40.5 0.0% 5.6% 9.6% n/a n/a n/a n/a
Quarry Bay 49.3 0.0% 4.3% -2.7% n/a n/a n/a n/a
Tsim Sha
Tsui 54.0 1.2% 3.0% 11.6% 12,300 0.4% 2.3% 16.4%
Cheung Sha
Wan 24.7 0.0% 0.0% 10.7% n/a n/a n/a n/a
Hung Hom 36.7 2.6% 8.4% 20.0% n/a n/a n/a n/a
Kowloon
East 37.0 2.9% 3.9% 10.2% n/a n/a n/a n/a
Mong Kok /
Yau Ma Tei 50.3 0.0% 1.8% 4.7% n/a n/a n/a n/a
Source: Knight Frank
Rents and prices are subject to revision.
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A number of luxury
residential leasing
transactions of houses were
recorded last month.
A number of major luxury
residential sales
transactions were recorded
in the first-hand property
market.
Residential
Table 6 Selected residential sales transactions
District Building Tower / floor
/ unit
Salable area
(sq ft)
Price
(HK$M)
Price
(HK$ psf)
Peak 3 Gough Hill
Road House 8,085 (Gross) $650 $80,396
Island
South 8 Tai Tam Road House 3,833 $193 $50,352
Happy
Valley The Signature
42nd floor /
duplex B 3,128 $151.3 $48,362
Happy
Valley
Broadwood
Twelve
50th
–51st floors /
units A 2,508 $132.8 $52,591
Mid-level
west AZURA 46
th floor / unit A 1,297 $46.2 $35,944
Source: Economic Property Research Centre
Note: All transactions are subject to confirmation.
Table 7 Selected residential leasing transactions
District Building Tower / floor
/ unit
Salable
area
(sq ft)
Monthly
rent (HK$)
Monthly rent
(HK$ psf)
Island
South Horizon Lodge House 2,464 $210,000 $85.2
Mid-Levels
Central Kennedy Heights
High floor /
unit B 2,929 $140,000 $47.8
The Peak 74 Mount Kellet
Road House 3,106 $205,000 $66.0
Pokfulam Baguio Villa Tower 31 /
low floor unit 2,119 $74,000 $34.9
Source: Knight Frank
Note: All transactions are subject to confirmation.
8
March 2013
Hong Kong Monthly
Pokfulam recorded notable
increases in both luxury
residential prices and rents in
February.
Luxury residential rents
dropped in three of the five
major luxury districts, during
the low season of Lunar New
Year.
Table 8 Month-on-month movement of luxury residential rents (Feb 2013)
Peak Island South Mid-Levels
Jardine’s
Lookout /
Happy Valley
Pokfulam
Table 9
Luxury residential market indicators (Feb 2013)
Net
effective
rent
Change Price Change
District HK$psf/
mth
From
Jan 13
From
Nov
12
From
Feb 12 HK$psf
From
Jan 13
From
Nov 12
From
Feb 12
The Peak $58.6 -0.9% -0.2% -4.3% $23,660 0.0% 0.0% 0.0%
Mid-Levels $42.1 -0.8% -1.3% -6.4% $21,872 1.0% 1.9% 11.3%
Pokfulam $31.8 3.5% 4.7% 4.0% $19,466 4.2% 4.2% 21.3%
Jardine’s
Lookout &
Happy
Valley
$41.5 -1.9% 4.6% 3.1% $20,328 3.0% 5.0% 14.5%
Island
South $42.7 0.5% 0.4% -5.7% $25,844 0.0% 2.7% 12.1%
Source: Knight Frank
Rents and prices are subject to revision.
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Wan Chai witnessed several
major retail property sales
transactions in February.
Major retail leasing
transactions were clustered
in Wan Chai and Mong Kok
last month.
Retail
Table 10 Selected retail sales transactions
District Building Floor / unit Net area
(sq ft)
Price
(HK$M)
Price
(HK$ psf)
Wan Chai 132 Johnston
Road Ground floor N/A $202.18 N/A
Central Lyndhurst
Building
Ground floor
/ unit E N/A $290 N/A
Yuen Long OTB Yuen Long
Building
Ground –
1st floors
N/A $208 N/A
Wan Chai Sing Kong
Building 1
st–3
rd floors N/A $170 N/A
Wan Chai 44–46 Johnston
Road Ground floor 1,750(G) $158 $90,286
Source: Economic Property Research Centre
Note: All transactions are subject to confirmation.
Table 11 Selected retail leasing transactions
District Building Floor / unit
Net
area
(sq ft)
Monthly
rent (HK$)
Monthly
rent (HK$
psf)
Wan Chai Fortune Building Ground floor /
unit 1 743 $238,000 $320.3
Mong Kok Foo Tat Building Ground floor /
units 1–2 728 $182,000 $250.0
Wan Chai Golden Hill
Mansion
Ground floor /
unit A 680 $100,000 $147.06
Mong Kok Lee Hing Building Ground floor /
unit F 395 $76,000 $192.41
Source: Economic Property Research Centre
Note: All transactions are subject to confirmation.
March 2013
Hong Kong Monthly
10
Rents in Causeway Bay and
Tsim Sha Tsui remained flat
in February.
In January, the local
retail sales value rose
10.5% year on year to
HK$47.4 billion, with the
value of consumer
durable goods surging
51.4% from January
2012.
Table 12 Month-on-month movement of prime street shop rents (Feb 2013)
Central Causeway Bay Tsim Sha Tsui Mong Kok
Table 13 Retail sales by outlet type (Jan 2013)
Value Share of total Change
Outlet (HK$ billion) % From
Dec 12
From
Oct 12
From
Jan 12
Jewellery, watches
and clocks and
valuable gifts
$10.5 22.0% -0.7% 39.3% 12.7%
Clothing, footwear
and allied products $6.3 13.3% -5.5% 33.9% -1.8%
Department stores $4.4 9.3% -20.3% 29.1% 1.4%
Fuel $0.9 1.8% 4.0% -0.3% 4.1%
Food, alcoholic
drinks and tobacco
(excluding
supermarkets)
$3.4 7.1% 8.8% 13.4% -1.4%
Consumer durable
goods $9.4 19.6% 9.1% 53.7% 51.4%
Supermarkets $4.3 9.0% 5.8% 12.5% -3.0%
Others $8.5 17.8% 12.0% 40.4% 4.4%
All retail outlets $47.7 100.0% 1.4% 34.1% 10.5%
Source: Census and Statistics Department
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